The growth outlooks of Asian economies remain weak for 2020, following a sudden deceleration in 2019 and the continuing U.S.-China trade war. The 2020 growth rate for the five major Association of Southeast Asian Nations countries was projected to inch up to 4.2% from the 2019 projection of 3.9%, but the figure stayed much lower than the levels before 2018. The Indian growth forecast for fiscal 2019/20 was projected at 5.0%, a sharp drop from the 6.8% recorded in the previous fiscal year.
Looking forward to the coming year, economists list U.S.-China tensions, the U.S. presidential election, the Chinese economic slowdown and geopolitical risks as factors affecting the global economy, a survey found.
The Japan Center for Economic Research and Nikkei conducted a quarterly consensus survey from Nov. 22 to Dec. 11, collecting 44 answers from economists and analysts in the five biggest ASEAN members -- Indonesia, Malaysia, the Philippines, Singapore and Thailand -- and India.
The 2019 growth outlook for ASEAN5 was revised downward by 0.2 point from the previous survey in September to 3.9%, marking the sixth consecutive downward revision since the September 2018 survey. The figure was 5.0% in the June 2018 survey.
The 2020 growth projection was unchanged from the previous survey at 4.2%. The figure is higher by 0.3 point than the 2019 forecast, but not as strong as the growth rate of 5.0% in 2017 and 4.8% in 2018.
Rate to Rise with More Layoffs
◆ List of survey respondents
Indonesia: Juniman, chief economist, Maybank Indonesia; Dendi Ramdani, head of industry and regional research department, Bank Mandiri; Umar Juoro, senior fellow, The Habibie Center; Wisnu Wardana, economist, Bank Danamon Indonesia
Malaysia: Suhaimi Ilias, chief economist, Maybank Investment Bank; Wan Suhaimie bin Wan Mohd Saidie, head, economic research, Kenanga Investment Bank; Vincent Loo Yeong Hong, senior economist, KAF Research
Philippines: Alvin Ang , director, Ateneo Center for Economic Research and Development, Ateneo de Manila University; Jonathan Ravelas, chief market strategist, BDO Unibank Inc.; Pauline Revillas, research analyst, Metrobank; Nicholas Mapa, senior economist, ING Bank Philippines; Emilio S. Neri Jr., vice president and lead economist, Bank of the Philippine Islands; Victor Abola, senior economist, University of Asia and the Pacific; Carlo Asuncion, chief economist, Union Bank of the Philippines; Mitzie Conchada, associate dean, school of economics, De La Salle University
Singapore: Manu Bhaskaran, CEO, Centennial Asia Advisors; Randolph Tan, director, Centre for Applied Research, Singapore University of Social Sciences; Yuma Tsuchiya, senior economist, MUFG Bank, Ltd.
Thailand: Panundorn Aruneeniramarn, assistant vice president, Siam Commercial Bank – Economic Intelligence Center; Nattaporn Triratanasirikul, assistance managing director, Kasikorn Research Center; Somprawin Manprasert, head of research division and chief economist , Bank of Ayudhya PCL; Amonthep Chawla, head of research, CIMB Thai Bank; Naris Sathapholdeja, head of TMB analytics, TMB Bank PCL
India: Punit Srivastava, head of research, Daiwa Capital Markets India; Dharmakirti Joshi, chief economist, CRISIL; Sonal Varma, India chief economist, Nomura India; Tirthankar Patnaik, chief economist, National Stock Exchange of India; Dilip Chenoy, secretary general, the Federation of Indian Chambers of Commerce and Industry (FCCI)
The slowdown is notable in export-oriented Malaysia, Thailand and Singapore. Malaysia's growth rate was projected to decrease from 4.7% in 2018 to 4.5% in 2019, and again to 4.3% in 2020. Wan Suhaimie of Kenanga Investment Bank in Malaysia expected growth "to moderate going into 2020 on the back of rising external headwinds."
Thailand's 2019 projection was revised downward by 0.5 point to 2.4%, a 1.7-point drop from 2018, and the 2020 forecast was revised down by 0.4% to 2.6%. "Thailand's economy is projected to grow at a slow pace in 2020 following global economic slowdown and uncertainty over trade war," said Amonthep Chawla of CIMB Thai Bank. Singapore's 2019 growth rate was projected to fall sharply to 0.7%, down from 3.1% in 2018. Manu Bhaskaran of Centennial Asia in Singapore expected growth to "pick up heading into 2020," but foresaw that "the pace will be gradual."
The Indonesian economy is expected to grow at around 5% in 2019 and 2020, but the 2019 projection was revised slightly downward from the previous survey. Domestic demand remains firm, but "Indonesia's economy is under pressure due to low export growth as commodity prices are relatively low," said Dendi Ramdani of Bank Mandiri.
The 2019 growth rate for the Philippines was projected to fall to under 6% for the first time in eight years, partly due to a delay in implementation of public investment. The growth rate is foreseen to return to 6.5% in 2020. Jonathan Ravelas of BDO Unibank expected a "double dose of stimulus," such as increased infrastructure spending and easy monetary policy, "to drive growth momentum."
The Indian economy slowed dramatically in 2019. Growth rates marked 5.0% and 4.5% in the April-June and July-September period respectively, due to a slowdown in the global economy and troubles in financial sectors. The forecast for fiscal 2019/20 was lowered by 1.1 points to 5.0%. The projection was 6.9% in the June survey and 6.1% in the September survey. "Weak consumer and business confidence, along with tight financial conditions, is likely to keep India's growth trajectory suppressed over the next two years," remarked Tirthankar Patnaik of the National Stock Exchange of India.
India's growth rate for fiscal 2019/20 is likely to fall below China's figure in 2019, which is estimated to be around 6% in a number of projections made by international organizations and research institutes. Such a reversal would be the first in six years.
The survey asked economists about issues or events that would be important for the world and domestic economies. Many economists noted the global impact of the U.S.-China trade war. "Prospects for a U.S.-China trade deal remain uncertain. President Donald Trump will likely keep squeezing China as part of his bid for reelection next year," commented Donald Hanna of CIMB Bank in Malaysia.
The U.S. presidential election is another big issue. "The general atmosphere of the world economy largely hinges on who becomes U.S. president from here onward," said Carlo Asuncion of the Union Bank of the Philippines. The impeachment of Trump, geopolitical risks and various issues related to developments in the world economy, such as further slowdown and sudden recovery, were also a focus.
As for the risks perceived by economists, "U.S.-China tensions" remained the top risk in Indonesia, Malaysia and Thailand. "Slowdown of Chinese economy" as a result of the trade war was the top risk recognized in Singapore. "Troubles in financial sectors" surged to become the top risk in India
The outlook for Asian economies has greatly deteriorated due to the impact of the corona shock. With the ongoing spread of the novel coronavirus (COVID-19), Asian economists have drastically lowered their growth outlooks. Some projections see negative growth rates for 2020 in Singapore and Thailand. Likewise Indonesia, the Philippines, and India face the end of several years of rapid growth at about 5% or more. Further downward revisions are expected if the virus is not contained. An increase in unemployment is projected throughout the region, and economists express concern about its potential social impact.
Malaysia case
Economy Stands Still Under Lockdown
Economists expect the 2020 COVID-19 pandemic to deal a heavy blow to the Malaysian economy. The average growth forecast is 2.1%, less than half of the 4.3% achieved in 2019. The lowest projection was 0.5%. The nationwide lockdown, which began
March 18 and is scheduled to last until April 14, is expected to negatively impact the economy in Q1 and Q2. Vincent Loo of KAF Research
says that “lockdown brings the whole economy to a standstill.”
Focus on Tourism, Supply Chain, Palm Oil
The survey asked economists about the impact of corona shock and their concerns. Wan Suhaimie of Kenanga Investment Bank observes that the corona shock caused a decline in international tourism. He also cites supply
chain disruption affecting exports of electronic appliances, and the decreasing trade of crude palm oil, etc. Vincent Loo of KAF finds that
“the economic impact of lockdown is largest.”
Downward Revisions in Sight
Economists suggest that the Q1 growth rate could have been negative. Suhaimi Ilias of Maybank Investment Bank says that “MCO
(the Movement Control Order) is expected to significantly pull down the growth of 1Q,” with a possible extension in sight. He projects
“0.3-3.0% growth in [Q1] 2020.” Wan Suhaimie of Kenanga reasons: “If the situation worsens, we might have to revise our forecast."
Index to Fall on Lower Oil Prices, Corona
The average forecast for 2020 was revised downward by 1.3 points to 0.5%. Vincent Loo of KAF projects the price index to fall in 1H 2020 “due to lower fuel prices amid the global oil price war between Saudi and Russia, and
weak demand pressure.” Wan Suhaimie of Kenanga adds that the corona shock will“adversely impact the domestic economy in the upcoming months” and that “domestic demand [should] gradually weaken.”
The average forecast for 2020 was raised by 0.1 point to 3.5%. Wan Suhaimie of Kenanga fears that “there is a possibility of higher
layoffs” if the impact of COVID-19 spreads and shows no sign of containment. “Layoffs and retrenchments will accelerate as global and
domestic economies fall into recession,” echoes Loo of KAF.
Depreciation Stress Amid Demand for USD
The average view projects a weaker ringgit against the USD toward the end of 2020. Wan Suhaimie of Kenanga says that “in the short term, the USD/MYR will test the 4.40/45 level due to stronger demand for USD as a safe haven currency.” While envisaging possible capital outflows from Malaysia, Loo of KAF also says: “The resuming of QE and launch of
helicopter money in the U.S. may…provide some mitigation by weakening the USD.”
Further Cuts Expected
The central bank cut the policy rate in February and March to 2.5%. Further cuts are expected. Suhaimi Ilias of Maybank expects measures toward “drastic easing” by the central bank, “to support the impact of slowdown
triggered by the pandemic and the drop in oil prices.” Loo of KAF adds that the bank is “to cut the Overnight Policy Rate further to a record low, as there is ample room amid low inflation and weak growth prospects.”
Corona Shock One of Multiple Risks
Economists ranked “Spread of coronavirus disease and its impact on economies” as the top risk. “Fall in commodity prices” came second.
Wan Suhaimie of Kenanga observes: “The escalating COVID-19 outbreak and the global oil price war are increasing liquidity and credit
risks.” On politics, Loo of KAF predicts that “political developments will take a backseat for now, as the country stays united in the fight against the virus.”
◆ Main points of the survey
- Growth forecasts for five ASEAN countries and India were lowered drastically from the previous survey in December 2019.
- Some economists projected negative growth rates in 2020 for Singapore and Thailand due to negative effects of the corona shock, which include declining exports and decreasing tourism.
- The average 2020 growth forecasts for Indonesia, the Philippines and Malaysia were revised downward by 0.9 points, 1.4 points, and 2.2 points respectively from the previous survey.
- The Indian growth projection for fiscal 2019/20 was 4.9%, down 1.2 points from the figure achieved in 2018/19. Economists do not expect recovery in 2020/21.
- Unemployment is expected to increase throughout the region.
- Most projections are made on the assumption that the spread of coronavirus infection will be contained in the first half of 2020. If it is not, further downward revisions are inevitable.
◆ List of survey respondents
Indonesia: Juniman, chief economist, Maybank Indonesia; Dendi Ramdani, head of industry and regional research department, Bank Mandiri; Umar Juoro, senior fellow, The Habibie Center; Wisnu Wardana, economist, Bank Danamon Indonesia
Malaysia: Suhaimi Ilias, chief economist, Maybank Investment Bank; Wan Suhaimie bin Wan Mohd Saidie, head, economic research, Kenanga Investment Bank; Vincent Loo Yeong Hong, senior economist, KAF Research
Philippines: Alvin Ang , director, Ateneo Center for Economic Research and Development, Ateneo de Manila University; Jonathan Ravelas, chief market strategist, BDO Unibank Inc.; Pauline Revillas, research analyst, Metrobank; Nicholas Mapa, senior economist, ING Bank Philippines; Emilio S. Neri Jr., vice president and lead economist, Bank of the Philippine Islands; Victor Abola, senior economist, University of Asia and the Pacific; Carlo Asuncion, chief economist, Union Bank of the Philippines; Mitzie Conchada, associate dean, school of economics, De La Salle University
Singapore: Manu Bhaskaran, CEO, Centennial Asia Advisors; Randolph Tan, director, Centre for Applied Research, Singapore University of Social Sciences; Yuma Tsuchiya, senior economist, MUFG Bank, Ltd.
Thailand: Panundorn Aruneeniramarn, assistant vice president, Siam Commercial Bank – Economic Intelligence Center; Nattaporn Triratanasirikul, assistance managing director, Kasikorn Research Center; Somprawin Manprasert, head of research division and chief economist , Bank of Ayudhya PCL; Amonthep Chawla, head of research, CIMB Thai Bank; Naris Sathapholdeja, head of TMB analytics, TMB Bank PCL
India: Punit Srivastava, head of research, Daiwa Capital Markets India; Dharmakirti Joshi, chief economist, CRISIL; Sonal Varma, India chief economist, Nomura India; Tirthankar Patnaik, chief economist, National Stock Exchange of India; Dilip Chenoy, secretary general, the Federation of Indian Chambers of Commerce and Industry (FCCI)
Comments
Post a Comment